Treasury defends proposed VAT increase

The VAT increase to 15%, announced last week, has not been well-received from most quarters, including from within the African National Congress.

Treasury Deputy Director-General Ismail Momoniat. Picture: @TreasuryRSA/Twitter

CAPE TOWN - Treasury is defending government’s decision to increase the value-added tax (VAT) rate, saying that it will have the least detrimental impact on growth.

But it’s not denying that lower-income households will be most affected.

The VAT increase to 15%, announced last week, has not been well-received from most quarters, including from within the African National Congress (ANC).

A joint meeting of Parliament’s finance committees is considering public comment on the budget tabled by former Finance Minister Malusi Gigaba, of which the greatest outcry has been around the VAT increase.

Treasury says the bottom line is that the economy is just not growing fast enough.

It says that increasing other taxes will not raise the same amount of money as VAT, and the amount is less certain.

Civil society groups are suggesting the 19 zero-rated food items be reviewed because they are not well-targeted to benefit the poor.

Treasury Deputy Director-General Ismail Momoniat says: “We’re open to reviewing the current zero-rated products and increasing the list.”

Treasury is suggesting that the Davis Tax Committee be asked to convene a panel of experts and to hold public hearings.